FAIR VALUE MEASUREMENT

The fair value hierarchy prioritizes the inputs used in measuring fair value as follows:


•	Level 1 — Quoted prices for identical instruments in active markets.


•	Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.


•	Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

A summary of assets (liabilities) measured at fair value is as follows:



	As of June 30, 2018
	Total			Level 1		Level 2		Level 3
Commodity contract derivatives	$	1,502		$	10	$	1,492	$	—
Contingent considerations for acquisitions	(20,065		)	—		—		(20,065		)
	$	(18,563	)	$	10	$	1,492	$	(20,065	)



	As of December 31, 2017
	Total			Level 1			Level 2			Level 3
Commodity contract derivatives	$	(7,189	)	$	(3,742	)	$	(3,447	)	$	—
Contingent considerations for acquisitions	(34,393		)	—			—			(34,393		)
	$	(41,582	)	$	(3,742	)	$	(3,447	)	$	(34,393	)

The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



	Contingent Consideration for Acquisitions
	2018			2017
Balance at beginning of period, January 1	$	34,393		$	46,568
Change in estimates included in earnings	(1,540		)	589
Settlements	(2,813		)	(3,980		)
Balance at end of period, March 31	30,040			43,177
Change in estimates included in earnings	(7,129		)	(24		)
Settlements	(2,846		)	(3,698		)
Balance at end of period, June 30	$	20,065		$	39,455

The estimated fair values of the Company’s financial instruments, which are not recorded at fair value, are as follows:



	As of June 30, 2018						As of December 31, 2017
	Asset (Liability) Carrying Amount			Fair Value			Asset (Liability) Carrying Amount			Fair Value
Financial liabilities:
Debt and lines of credit	$	(220,188	)	$	(412,214	)	$	(294,085	)	$	(273,983	)

The carrying amounts reported in the Condensed Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair values. Money market funds are included in cash and cash equivalents on the Condensed Consolidated Balance Sheets.

The Company used the following methods and assumptions to estimate fair value of its financial instruments:

Commodity derivatives: The instruments held by the Company consist primarily of futures contracts, swap agreements, purchased put options and written call options. The fair value of contracts based on quoted prices of identical assets in an active exchange-traded market is reflected in Level 1. Contract fair value that is determined based on quoted prices of similar contracts in over-the-counter markets is reflected in Level 2.

Contingent consideration for acquisitions: The fair value of the contingent consideration regarding REG Life Sciences, LLC ("REG Life Sciences") is determined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes that would occur should achievement of certain milestones related to the development and commercialization of products from REG Life Sciences' technology occur. There is no observable market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the expected future delivery of product enhancements to estimate the fair value of these liabilities. An 8.0% discount rate is used to estimate the fair value of the expected payments. During November 2016, the Company's Board of Directors authorized a review of strategic alternatives for the Life Sciences business. The course of action chosen as a result of this strategic review might affect the timeline and assumptions used to estimate the fair value of REG Life Sciences contingent consideration.

The fair value of all other contingent consideration is determined using an expected present value technique. Expected cash flows are determined using the probability weighted-average of possible outcomes that would occur should the achievement of certain milestones related to the production and/or sale of biomass-based diesel at the specific production facility. A discount rate ranging from 5.8% to 10.0% is used to estimate the fair value of the expected payments.

Convertible debt conversion liability: The fair value of the convertible debt conversion liability is estimated using the Black-Scholes model incorporating the terms and conditions of the 2036 Convertible Senior Notes and considering changes in the prices of the Company's common stock, Company stock price volatility, risk-free rates and changes in market rates. The valuations are, among other things, subject to changes in the Company's credit worthiness as well as change in general market conditions. As the majority of the assumptions used in the calculations are based on market sources, the fair value of the convertible conversion liability is reflected in Level 2.

Debt and lines of credit: The fair value of long-term debt and lines of credit was established using discounted cash flow calculations and current market rates reflecting Level 2 inputs.